401(k) Embezzlement Tied to Escort Service

March 3, 2009 (PLANSPONSOR.com) - Federal
prosecutors have charged the former controller of one of
Boston's largest investment firms of diverting funds from the
company's retirement plan - to bank accounts linked to an
adult escort service.

The Boston Business Journal reports that the U.S.
Attorney’s office in Boston said late Thursday that Mark J.
Harrington, 52, was charged in federal court with
embezzling roughly $368,000 from the 401(k) plan of his
former employer, Anchor Capital Advisors in Boston.

Harrington was a vice president and controller at Anchor
Capital, which managed more than $7 billion in client
assets, according to the report.
Harrington was fired from Anchor Capital in January after
being confronted about the alleged scam by firm president
Bill Rice, according to the report.

In an
affidavit
filed in support of the criminal complaint, special agent
Christina A. Rosen detailed a plan orchestrated by
Harrington over a six-month span that allegedly saw him
siphon unvested funds within Anchor Capital’s 401(k) plan
into bank accounts with Danversbank and Citizens Bank,
according to the Business Journal.
The report cites the affidavit in noting that Carmine P.
Arenella, who also had access to those funds, was involved
with Harrington in an adult escort business that was
detailed in multiple e-mails uncovered in the
investigation.

According to the report, the alleged scam started
roughly two years after Anchor Capital was acquired by
Boston Private Financial Holdings in June 2006. At that
time, Anchor Capital’s employees were encouraged to use
Boston Private’s existing 401(k) plan going forward,
according to Rosen’s written affidavit.

At that point, Harrington was given the responsibility
of winding down Anchor Capital's own retirement plan, which
was managed in-house and used State Street and Fidelity
Investments as fund custodians.
Rosen claims that the alleged embezzlement focused on
forfeited accounts left by former Anchor Capital employees.
After being questioned about the embezzlement, Harrington
allegedly admitted to targeting those funds because they
are lightly audited, Rosen said.

The alleged theft came to light in December, when
Harrington was caught on surveillance tape trying
unsuccessfully to cash a $9,788 check at several
Danversbank's north of Boston.

Rice and Anchor Capital assistant controller Kyle Gorman
later identified Harrington on the surveillance tapes,
according to the court filing.
If convicted on these charges, Harrington faces up to 5
years imprisonment, to be followed by 3 years of supervised
release and a $ 250,000 fine.

The case was investigated by the U.S. Department of
Labor and the Employee Benefits Security Administration in
Boston.